Institutional invertors have pioneered the application of quantitative security valuation techniques, such as dividend discount models. They have explicity sought to maintain adequate portfolio diversifications and to control systematic and unsystematic risk using complex risk models. In large part because of the diverse needs of institutional invertors, bond trading firms have created any array of complex fixed income securities. Collateralized mortgage obligations putable bonds and floating rate notes .
The growth in assets controlled by institutional investors seems unlikely to abate. Purchase of mutual fund shares and contributions to pension funds will continue to rise. Consequently, the influence of institutional invertors on security markets can be expected to increase further in the years ahead.
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